Income Taxes

6 Months Ended

Dec. 31, 2020

Income Taxes

Income Taxes

Note 8: Income Taxes

The Company and its subsidiaries file income tax returns in the U.S. Federal jurisdiction and various states. The Company is no longer subject to federal and state examinations by tax authorities for tax years ending June 30, 2015 and before. The Company recognized no interest or penalties related to income taxes.

The Company’s income tax provision is comprised of the following components:

	For the three-month periods ended				For the six-month periods ended
(dollars in thousands)	December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019
Income taxes
Current	$	3,139	$	1,915	$	5,903	$	3,884
Deferred		14		6		(3)		12
Total income tax provision	$	3,153	$	1,921	$	5,900	$	3,896

The components of net deferred tax assets (included in other assets on the condensed consolidated balance sheet) are summarized as follows:

(dollars in thousands)	December 31, 2020		June 30, 2020
Deferred tax assets:
Provision for losses on loans	$	8,309	$	5,802
Accrued compensation and benefits		607		825
NOL carry forwards acquired		123		149
Minimum Tax Credit		—		130
Unrealized loss on other real estate		170		257
Other		—		26
Total deferred tax assets		9,209		7,189
Deferred tax liabilities:
Purchase accounting adjustments		165		64
Depreciation		1,664		1,665
FHLB stock dividends		120		120
Prepaid expenses		255		259
Unrealized gain on available for sale securities		1,195		1,265
Other		39		104
Total deferred tax liabilities		3,438		3,477
Net deferred tax asset	$	5,771	$	3,712

As of December 31, 2020, the Company had approximately $675,000 and $119,000 in federal and state net operating loss carryforwards, respectively, which were acquired in the July 2009 acquisition of Southern Bank of Commerce, the February 2014 acquisition of Citizens State Bankshares of Bald Knob, Inc., the August 2014 acquisition of Peoples Service Company, and the June 2017 acquisition of Tammcorp, Inc. The amount reported is net of the IRC Sec. 382 limitation, or state equivalent, related to utilization of net operating loss carryforwards of acquired corporations. Unless otherwise utilized, the net operating losses will begin to expire in 2027.

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown below:

	For the three-month periods ended				For the six-month periods ended
(dollars in thousands)	December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019
Tax at statutory rate	$	3,192	$	2,024	$	5,866	$	4,083
Increase (reduction) in taxes resulting from:
Nontaxable municipal income		(108)		(113)		(211)		(226)
State tax, net of Federal benefit		261		87		502		196
Cash surrender value of Bank-owned life insurance		(205)		(53)		(263)		(106)
Tax credit benefits		(5)		(4)		(9)		(6)
Other, net		18		(20)		15		(45)
Actual provision	$	3,153	$	1,921	$	5,900	$	3,896

For the three- and six- month periods ended December 31, 2020 and 2019, income tax expense at the statutory rate was calculated using a 21% annual effective tax rate (AETR).

Tax credit benefits are recognized under the deferral method of accounting for investments in tax credits.